REPORT TITLE:
HSDC; Appropriation


DESCRIPTION:
Appropriates unspecified amount to the Hawaii strategic
development corporation revolving fund; restricts HSDC
investments to those with at least matching private investment;
allocates unspecified amount to develop a plan to further develop
venture capital in Hawaii.  (SD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1607
THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO ECONOMIC DEVELOPMENT AND PRIVATE INVESTMENT
   ATTRACTION.


BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that economic
 
 2 diversification throughout many communities has been enhanced by
 
 3 the availability of venture capital investment.  Areas such as
 
 4 Silicon Valley, Route 128 in Boston, Austin, Texas, and Research
 
 5 Triangle in North Carolina have benefited greatly from venture
 
 6 capital supporting high growth technology companies.  Nationally,
 
 7 fourteen billion dollars of venture capital funding was generated
 
 8 in the last year.  Hawaii's future economic diversification and
 
 9 creation of a flourishing technology component will be dependent
 
10 on the availability of venture capital.
 
11      The Hawaii strategic development corporation (HSDC) was
 
12 established by the legislature to develop a sustainable venture
 
13 capital industry in Hawaii and attract investment from the
 
14 private sector.  Hawaii has been successful in developing many
 
15 new technology companies which utilize research undertaken at the
 
16 University of Hawaii with support from the high technology
 
17 development corporation and the department of business, economic
 
18 development, and tourism.
 
19      To date, HSDC has launched five venture capital limited
 

 
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 1 partnerships which have invested in twenty-one companies in the
 
 2 fields of information technology, telecommunications,
 
 3 biotechnology, aquaculture, food processing and distribution, and
 
 4 others.  The corporation has leveraged its initial investment
 
 5 funds of $5,250,000 over ten times with private investment, and
 
 6 generated over $58,000,000 of venture capital for Hawaii
 
 7 companies.  As a result of receiving venture capital investment,
 
 8 these twenty-one companies have created or sustained over five
 
 9 hundred jobs.
 
10      HSDC's investments have served as the catalyst for Hawaii's
 
11 venture capital industry.  It is the goal of HSDC to use its
 
12 investment fund to attract private investment from Hawaii, the
 
13 U.S. mainland, and Asia, as private investment is seen as the
 
14 long-term source of venture capital for Hawaii's businesses.
 
15      HSDC's seed funding of start-up companies represent long-
 
16 term investments which have not yet generated financial returns.
 
17 The corporation has fully committed its available funds and will
 
18 be unable to maintain its momentum for business creation without
 
19 additional funding.
 
20      There is a continuing need by Hawaii businesses for venture
 
21 capital so that in the future companies such as Verifone,
 
22 Neugenesis, Intelect, and Aspect will not have to relocate their
 
23 operations to areas where venture capital is more readily
 

 
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 1 available.
 
 2      The purpose of this Act is to appropriate funds to be paid
 
 3 into the Hawaii strategic development corporation revolving fund.
 
 4      SECTION 2.  There is appropriated out of the general
 
 5 revenues of the State of Hawaii the sum of $          , or so
 
 6 much thereof as may be necessary for fiscal year 1999-2000, to be
 
 7 paid into the Hawaii strategic development corporation revolving
 
 8 fund.
 
 9      SECTION 3.  The sum appropriated shall be expended by the
 
10 Hawaii strategic development corporation for the purposes of this
 
11 Act provided that:
 
12      (1)  Investments shall be made primarily in high technology
 
13           companies;
 
14      (2)  An investment expenditure is only permitted when the
 
15           amount is at least equally matched by private sector
 
16           investment; and
 
17      (3)  Up to $        shall be used to develop a plan to
 
18           further develop venture capital in Hawaii identifying
 
19           investment opportunities, listing resources and support
 
20           organizations, describing the impact of venture capital
 
21           on various communities, and targeting additional
 
22           private investment capital for Hawaii companies.
 
23      SECTION 4.  Section 211F-5, Hawaii Revised Statutes, is
 

 
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                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 amended to read as follows:
 
 2      "[[]211F-5[]]  Hawaii strategic development corporation
 
 3 revolving fund.  There is established the Hawaii strategic
 
 4 development corporation revolving fund[.] which shall be
 
 5 administered by the board.  The following moneys shall be
 
 6 deposited into the Hawaii strategic development corporation
 
 7 revolving fund and shall not be considered part of the general
 
 8 fund:  all moneys appropriated by the legislature, received as
 
 9 repayments of loans, earned on investments, received pursuant to
 
10 a venture agreement, received as royalties, received as premiums
 
11 or fees charged by the corporation, or otherwise received by the
 
12 corporation.  The department of business, economic development
 
13 and tourism shall not restrict the use of any moneys in the
 
14 Hawaii strategic development corporation revolving fund."
 
15      SECTION 5.  Statutory material to be repealed is bracketed.
 
16 New statutory material is underscored.
 
17      SECTION 6.  This Act shall take effect on July 1, 1999.